Costa Rica: The Practice Of Factoring In Costa Rica: More About Your Legal Regulations

Among the financial tools used in our country,
factoring in Costa Rica is not something new. This
financial process has been in practice for several
years and it's quite useful for companies that need to improve
their liquidity with urgency to continue operating regularly.
Factoring or invoice discounting
is a process by which a company, by signing a contract and paying a
commission and the corresponding interest rate, finances the total
amount of the bills from another company or
person, such as invoices, bills of exchange,
promissory notes and other similar documents, and then it is
responsible to collect them from the debtor once the notification
(is an important step that cannot be ignored and that is
fundamental to the legality of the process) of such assignment of
bills is made. With this option of financing, it
is possible to obtain a faster funding with
different credit guidelines that can help both SMEs and big
companies, converting these credit accounts into
cash sales.

This funding mechanism is regulated by Costa
Rican laws, specifically by the Commercial and Civil Codes and its
suppliers can be any corporation or physical person with legal
capacity. In Costa Rica, factoring is regulated by the figure of
the assignment of receivables (article 460 and
concordant of the Commercial Code). Now, we will proceed to deep on
the regulations related to factoring.

Regulations in the Commercial Code

To start regarding the billing document, which
is the basis of the process, according to Article 460 of the
Commercial Code, "The bill is enforceable
against the buyer for the amount overdrawn". "The amount
established in the invoice, is presumed true and the signatures
authentics." It is very important to emphasize that the bill
becomes enforceable only if the buyer, his agent or his manager,
when authorized in writing to sign on his behalf, signs it.

These bills will become
enforceable, in accordance with Article 460 bis,
and may be validly transmitted by endorsement (following the rules
of the endorsement of securities according to Article 705 of the
Commercial Code).

With regard to the transfer of non-endorsable
credits, article 490 specifies that the process will
"be subject to the rules set by Articles 1101 to 1116 of the
Código Civil, if is not set otherwise in this Chapter."
Then, in Article 491 of the Commercial Code, it is specified that
the debtor must be notified, and the assignment will not be
effective until this notification is made.

Such assignment of receivables shall be valid
from its date and shall be exempted of any stamps or other taxes.
In addition, the notary fees shall be established by agreement
between the parties.

The debtor is not necessarily a passive entity in this
transaction, as it can raise defenses that are not a result of the
enforced title. Article 492 details the rules that
must be followed to do so.. On the other hand, it is important to
consider, according to Article 493, that: "Unless otherwise
agreed, the assignor of a commercial credit
responds only for the legitimacy of credit and or the personality
by which he made the transfer, but it does not guarantee the
solvency of the debtor."

In a future article, we will talk about the regulations listed
in the Civil Code.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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